Red Bull GmbH continued to maintain its global leadership in energy drinks by both volume and value in 2012 despite Monster and The Coca-Cola Co’s (TCCC) expansion on all fronts. However, Red Bull is facing serious strategic challenges and has introduced a string of initiatives to maintain its growth. Euromonitor International believes that leveraging its relationship with sister company TC Pharmaceutical Industry Co Ltd (TC Pharm) could potentially allow it to make a meaningful breakthrough into core Asian growth markets.
TCCC has been successful at leveraging its distribution network to launch Burn across many markets and support Monster. Burn is now a major threat to Red Bull in Brazil while in the US Monster has overtaken Red Bull in terms of off-trade volume sales. Red Bull will need to find a way to hold on to its number one ranking globally in energy drinks and stave off this competition in both developed and emerging markets. The building of its manufacturing facility in Brazil is a positive move given that the country has a large population of lower-income consumers.
In 2013, Red Bull, for the first time in 15 years, added new products to its energy drinks range. Edition is a range of three new flavours and thus far available only in the US market. The likelihood, however, is that this range will be rolled out to other markets. The move is in response to growing competition. Success for this launch will be crucial to the company’s growth prospects in mature markets.
The story in Asia
Austria’s Red Bull has achieved strong growth in Asia Pacific over the past five years thanks to a good performance in the mature Japanese energy drinks market, increasing its sales from US$33 million in 2007 to US$224 million in 2012. Beyond Japan, however, Red Bull’s progress is hardly impressive. Its expansion into major energy drinks growth markets such as China, the Philippines and Vietnam might have been stifled by its very own sister brand, TC Pharm’s Red Bull. In China, for example, TC Pharm commands more than an 80% volume share, with sales underpinned by its wide distribution network, while Red Bull has yet to register a share. As both companies are privately-owned and tend to disclose little financial information or details with regard to their cooperation, it remains unknown if they have an agreement in place as to how to market their products in these crucial Asian markets in which TC Pharm’s Red Bull already commands a large share. In any case, Red Bull might find itself in a better position if it were to get help from its local sister company.
One issue is that Mr Dietrich Mateschitz and Chaleo Yoovidhya (the owner of TC Pharm) each owned a 49% stake in Red Bull GmbH prior to 2012, when Mr Yoovidhya passed away. Mr Yoovidhya’s son Chalerm holds the remaining 2%. While Mr Yoovidhya was alive he acted as a silent partner. Thus, future moves will really depend on the two partners’ renegotiation of the initial deal, which was completed years ago. Will they continue with the existing form of operations and want to grow independently in the region or would they like to expand together to consolidate their share?
On the one hand, TC Pharm already holds a commanding share of the Chinese energy drinks market so it may feel it does not have to change. However, the market is likely to expand further and by taking action to expand its product offering with the Austrian variant, it could grow the market further and defend itself against others, potentially TCCC. While there is no perfect business solution, Euromonitor International thinks the latter would be a quicker way to help them grow and consolidate, saving plenty of legwork for Austria’s Red Bull and enabling both partners to potentially enjoy growing revenues.